16 replies to this topic

[IYB]

Below was my post on Monday, the day the McO hit a 21st Century record -142.58 at the close. Today, let's follow up with what we *might* expect after this historic event, based on what followed the October 2008 crash and the 2010 flash crash that, under similar circumstances to now, created McO readings of -117 and -136 respectively. We could have shown 2007 and 2009 as well, and a quick look will reveal very similar results - significant NEW LOWS within days after the McO low. But the 2008 and 2010 situations were the most analogous to current times based on market internals at the time versus now. And clarity is the sibling of simplicity.

We'll show below comparisons of what followed the extreme low readings in McO then and where we are now - with the implication, of course, that the pattern ahead will likely *imitate* past patterns - though nothing repeats exactly, of course.

From SS.com website just now...

Noon... NYMO is currently calculating to -140 using current data. A close here would be the lowest of the current millenium, as we checked readings back to 1997, and find no NYMO readings below the record -136.21 of May 20, 2010. Just a quick study shows that the lows for each the last 5 years were -103.13 on July 27, 2007, -129.1 on Oct 9, 2008, -117.23 on February 23, 2009, -136.21 on May 20, 2010, and today's number, currently about -140 at this point. The yearly lows just cited preceded SPX lows by 29, 8, 29, and 19 trading days, and SPX lows on those subsequent lows were lower than the SPX close on the day of the McO low by 59, 22, 144, and 89 SPX points. We'll discuss all of this in our nightly report tonight.

But the implication for the short term here is that we can expect a new low on SPX for this move somewhere around 25 trading days from now (plus or minus), and that the low will be lower than today's close by some 80 points (plus or minus). Those are very rough numbers, certainly not cast in cement, but based on the fact that external follows internal, and the historical record for the last five years, that gives us some idea of what may follow. But first things first - in each case of those prior four cited, there was at least a small bounce after the day that McO cratered.

Regards, D

First lets look at the McO and SPX lows of October 9, 2008 and May 9, 2010:




....and where we are now, for comparison:



So as to "keep it simple", I'll leave it there, though we could show all sorts of comparisons with other market internals like TRIN, TRINQ, NYSI, NASI, NYHL, NAHL, etc. They all bring me to the same conclusion. If we were to follow the same pattern perfectly, though of course things are almost never "perfect", we'd see one more good up day Monday, then a slide to NEW 2011 SPX LOWS within the following seven trading days.

Just a heads up. Good trading and good weekend, Don

[zman]

Below was my post on Monday, the day the McO hit a 21st Century record -142.58 at the close. Today, let's follow up with what we *might* expect after this historic event, based on what followed the October 2008 crash and the 2010 flash crash that, under similar circumstances to now, created McO readings of -117 and -136 respectively. We could have shown 2007 and 2009 as well, and a quick look will reveal very similar results - significant NEW LOWS within days after the McO low. But the 2008 and 2010 situations were the most analogous to current times based on market internals at the time versus now. And clarity is the sibling of simplicity.

We'll show below comparisons of what followed the extreme low readings in McO then and where we are now - with the implication, of course, that the pattern ahead will likely *imitate* past patterns - though nothing repeats exactly, of course.

From SS.com website just now...

Noon... NYMO is currently calculating to -140 using current data. A close here would be the lowest of the current millenium, as we checked readings back to 1997, and find no NYMO readings below the record -136.21 of May 20, 2010. Just a quick study shows that the lows for each the last 5 years were -103.13 on July 27, 2007, -129.1 on Oct 9, 2008, -117.23 on February 23, 2009, -136.21 on May 20, 2010, and today's number, currently about -140 at this point. The yearly lows just cited preceded SPX lows by 29, 8, 29, and 19 trading days, and SPX lows on those subsequent lows were lower than the SPX close on the day of the McO low by 59, 22, 144, and 89 SPX points. We'll discuss all of this in our nightly report tonight.

But the implication for the short term here is that we can expect a new low on SPX for this move somewhere around 25 trading days from now (plus or minus), and that the low will be lower than today's close by some 80 points (plus or minus). Those are very rough numbers, certainly not cast in cement, but based on the fact that external follows internal, and the historical record for the last five years, that gives us some idea of what may follow. But first things first - in each case of those prior four cited, there was at least a small bounce after the day that McO cratered.

Regards, D

First lets look at the McO and SPX lows of October 9, 2008 and May 9, 2010:




....and where we are now, for comparison:



So as to "keep it simple", I'll leave it there, though we could show all sorts of comparisons with other market internals like TRIN, TRINQ, NYSI, NASI, NYHL, NAHL, etc. They all bring me to the same conclusion. If we were to follow the same pattern perfectly, though of course things are almost never "perfect", we'd see one more good up day Monday, then a slide to NEW 2011 SPX LOWS within the following seven trading days.

Just a heads up. Good trading and good weekend, Don

Don, thanks for the great post...cheers..

[qqqqtrdr]

Don: I don't know if history repeats itself.... I was looking to find differences on the positive side on the charts.... Rydex Ratio, and 10-day Put/Call Ratios are very close the the October 2008 cycles..... Bonds correlate closer to the is closer looking to the late December 2008 cycles. In October 2008 the market PE ratio was 20. December 2008 it was closer to 17... PE or NYSE was dropping every quarter in 2008. It is now at 15, and average PE is rising every quarter for NYSE.... I agree the basic charts you mention are similar. On bearish side McClellan Summation is more negative than it was in late 2008.. It will be interesting to see what happens next week.... Charts are the same, half of the circumstances are different... Barry

[IYB]

I don't know if history repeats itself....

Well...if it doesn't then this board is a waste of time, TA is an illusion, and we should all find new careers. The four most dangerous words a trader can utter, imho, are "this time it's different". Very best, D

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=1&mn=7&dy=0&i=p23824210672&a=181755090&r=319.png

[Dex]

Don:

I don't know if history repeats itself....

It does ...

[andiron]

good work don...i have said from july SPX 1040 is expected before this down wave completes

[pdx5]

" though of course things are almost never "perfect", we'd see one more good up day Monday, then a slide to NEW 2011 SPX LOWS within the following seven trading days." Thanks for a easy to follow summary, as usual. Greatly appreciated.

[DrSP]

Well...if it doesn't then this board is a waste of time, TA is an illusion, and we should all find new careers. The four most dangerous words a trader can utter, imho, are "this time it's different". Very best, D

No kidding and you summed it up very well, Don. I'd be calling a fool myself if I say we have formed an IT bottom but I may disagree only if you say market will start falling from tomorrow. Charts more often rhymes with Oct. 2008 than any other crash. But, in all those crashes you mentioned, market rallied till the index captured atleast 3 or 4 of the lost candlesticks (which in 10/08 was 200 points).

Market has 3 options:

Go above 1200, fool us and fall back.
Go above 1200, cause a slight down, get some shorts and punch higher with short squeeze.
Fall straight from here.

I will sell short, if we go above 1200 or fall below 1160. If I short higher than 1200, then a good 7% market stop will be needed.

Thanks, Don.

[entre]

Don, I'll play the devils advocate here. How do you compare the low the market made this past week to the September 2001 bottom?

[Rogerdodger]

Laundry's observations today agree that we will likely top next week and continue the downward move.
His Ringing low off of the 2009 bottom hits early October.
He then expects it to form the basis of a small T, but larger cycles continue down until it quits going down.

http://www.ttheory.c...bservations.php